In Chemical Solvents, Inv. v. Greenwich Insurance Co., 2023 WL 179772 (6th Cir. 1/13/22), the Sixth Circuit Court of Appeals held that when an insurance company had been targeted by a policyholder for indemnification in a “all sums” allocation jurisdiction, the insurer was entitled to later seek contribution from policies that would result in payments by the policyholder. In this case, the insureds settled a claim for bodily injuries resulting from chemical exposure over many years. Under Ohio law, the insured had the right to utilize a “all sums” approach to the allocation of coverage among multiple policies triggered by continuous losses. The insured sought indemnification from two of the various insurers that issued policies during the relevant time period in question. Under Ohio’s “all sums” allocation rule, the targeted policies were required to pay the insured’s loss in full up to the policy limits. Then, allocation of the loss among all triggered policies occurred in an equitable contribution action brought by the targeted insurers against other insurers whose policies were triggered, but were not targeted by the insured.
The targeted insurers worked out an arrangement amongst themselves for which each policy was responsible. Under the arrangement, the targeted insurers contributed funding from other policies that were issued to the insured, but which were not targeted by the insured for indemnification. One of the other non-targeted policies was reinsured by a group of captive insurers that were potentially owned by the insured. As a result, the insured ended up being responsible for a large portion of what the captive insurer owed in the secondary contribution action.
The insured argued that Ohio law did not permit targeted insurers under Ohio’s all sums allocation rule to reallocate costs in a way that would trigger a captive insurer’s policy benefits, and thereby would require the insured to make those payments by way of indemnity contribution. This argument was rejected by the Sixth Circuit Court of Appeals.
The Sixth Circuit acknowledged that the policy goal of an “all sums” allocation approach was to shift the burden of calculating relative liability to the insurers. However, that approach did not absolve the insured of all financial burden. The Court noted that the targeted insurers were not seeking contribution from the insured directly, but rather were seeking it from another insurer, albeit a captive insurer. The Court could find no jurisdiction that had prohibited that type of contribution in situations where the insured would face financial consequences for the follow-up contribution down the line.